LATE AMENDMENT TO PLEADINGS SHOULD NOT HAVE BEEN ALLOWED: CLAIMANT COMES TO GRIEF ON APPEAL

In Ali -v- Siddique [2015] EWCA Civ 1258 the Court of Appeal overturned a decision granting permission to amend the Particulars of Claim. Consequently the defendant’s appeal was allowed and the claimant’s action failed.

KEY POINTS

There is a heavy burden on a party applying for a very late application to amend pleadings.

An explanation for the lateness is called for and the court must consider the consequences for the opposing party.

In the current case the Recorder should not have allowed the claimant’s application to amend made on the first day of the trial and the appeal would have been allowed on that ground alone.

PRACTICE POINTS

Pleadings are important, even in a case with a relatively modest value (judgment was for £13,000).

The pleadings, and the evidence in support should be reviewed at the earliest practicable stage.

THE CASE

The claimant brought an action alleging that the defendant had retained money paid to him as an agent.

At the trial the Recorder allowed the claimant to amend the particulars to plead that a duty of care was owed in relation to the money paid.

The Recorder found that the the defendant was negligent and in breach of trust and awarded the claimant 50% of the damages sought (the deduction being for contributory negligence).

THE PLEADINGS AND THE AMENDMENTS

The case, as originally pleaded, stated that the defendant was an agent. However new arguments were foreshadowed in the claimant’s argument lodged shortly before the trial. Additional arguments were then put forward in the re-drafted Particulars which were served on the second day of the trial.

The action was duly fixed to come on for trial before the Recorder in the Bradford County Court on 28 April 2014. It was listed for three days. Shortly before the trial began, Mr Alfred Weiss, who appeared at the trial on behalf of Mr Ali, as he has on this appeal, prepared and lodged a skeleton argument which, in addition to elaborating upon the various allegations contained in the particulars of claim, included for the first time a contention that, in all the circumstances, Mr Siddique had assumed a responsibility to Mr Ali in respect of the services he had agreed to perform and that, if and in so far as he had entrusted the cheques to a third party, he had negligently performed those services and was liable in damages for any loss Mr Ali had suffered thereby.

This further allegation was not, however, accompanied by any proposed amendment to the particulars of claim. This deficiency prompted the Recorder, on the first day of the trial, to ask Mr Weiss whether he intended to make an application on Mr Ali’s behalf for permission to amend the particulars of claim. He indicated to Mr Weiss that he would be sympathetic to such an application provided that it would make no difference to the evidence each side wished to adduce. Not surprisingly, Mr Weiss responded that, in these circumstances, he did wish to make an application for permission to amend the pleading and that he would draft an appropriate amendment overnight. He also submitted that the amendment would have no impact upon the evidence and that it would be in the interests of justice to allow it, albeit that the application was being made at a late stage.

Mr Soofi Din, who appeared at the trial on behalf of Mr Siddique, as he has on this appeal, indicated that he would like to see the amendment but that he did not anticipate objecting to the order sought should it prove to be the case that the amendment would indeed have no impact upon the evidence. In my judgment it is clear that Mr Din was in this way reserving his position.

At this point and despite Mr Din’s response, the Recorder gave Mr Ali permission to amend the pleading. It is to be noted that he did so without seeing a draft of the proposed amendment and on the basis that it would have no impact upon the evidence that either side might wish to adduce. I must return to the terms of the Recorder’s ruling later in this judgment and, as will be seen, he later characterised it as being one which granted Mr Ali permission to amend “in principle”.

The Recorder was then faced with a further application, this time made by Mr Din on behalf of Mr Siddique. He sought permission to call Mr Khan as a witness to explain his involvement in the transaction. Mr Din submitted that it would clearly be in the interests of justice for Mr Khan to be called because Mr Ali was himself intending to rely upon the transcript of the evidence given by Mr Khan at the trial of Mr Chowdhury and it was desirable that Mr Khan should give evidence in person. He explained that Mr Khan could be made available on the second day of the trial and that those instructing him had prepared a draft witness statement.

The Recorder dismissed this application for reasons which he elaborated in his written judgment of 23 October 2014. In summary, he considered that the application was made far too late and that the evidence given by Mr Khan at Mr Chowdhury’s trial, as recorded in the transcript, was, at least in part, inconsistent with the case that Mr Siddique was now seeking to advance in that Mr Khan said at that trial that he did not know and had never met Mr Ali, and that he had only dealt with Mr Siddique.

On the second day of the trial Mr Weiss produced the draft amended pleading as he had promised. It reads in material part:

“Common law duty

22A. The Defendant owed the Claimant a duty of care in respect of [the 35 lakh transaction].

22B. Said duty arose out of the following circumstances:

a) The Claimant trusted the Defendant to carry out a particular task, namely to pay to the Claimant’s bank account in Bangladesh the total sum of 35 Lakh.

b) The Claimant had poor English language, written and spoken.

c) The Defendant was highly educated and had good use of English language.

d) The Claimant had a history of reliance upon the Defendant’s assistance in financial affairs and matters involving literacy. In particular, the Defendant had arranged the re-mortgage of the Claimant’s property from a 25 year loan to a 10 year loan. The Defendant had arranged a further re-mortgage of the Claimant’s property to raise the funds for the 35 Lakh.

e) The Defendant made a promise to pay the 35 Lakh into the Claimant’s bank account.

f) The Defendant knew or ought to have known that the Claimant was relying upon that promise.

22C. In so far as any misrepresentation is required to found the duty of care the misrepresentation was the Defendant’s promise to transfer the monies to the Claimant’s bank account. This was a misrepresentation because it implies that the Defendant was in a position to fulfil that promise. However, the Claimant learned after the transactions between him and the Defendant involving the two cheques, that the Defendant had in fact passed the cheques to a ‘middleman’. If the Defendant in fact passed the cheques to a middleman, then he was in no position to promise to transfer the monies to the Claimant’s bank account as he was submitting the cheques to the middleman and therefore had no control over the destination of the monies that could be drawn on those cheques.

22D. The Defendant was negligent in that he:

a) Gave the cheques to a “middleman”.

b) Failed to ascertain the trustworthiness of the individual(s) to whom he was passing the cheques.

c) Failed to ascertain the trustworthiness of the individual(s) to whom he addressed the payee name on the cheques.

d) Failed to inform the Claimant that he would be passing the cheques onto a “middleman”.

e) Failed to seek the Claimant’s consent to pass the cheques onto a “middleman”.

f) Failed to pay the monies that could be drawn on the cheques to the Claimant’s bank account through a reputable money transfer agency.

g) Failed to pay the monies that could be drawn on the cheques into the Claimant’s nominated Bangladeshi bank account.

h) Promised to pay the monies to the Claimant in circumstances where the Defendant knew or ought to have known that that he was entrusting the cheques to a third party thus relinquishing control over the monies that could be drawn on those cheques.

i) Failed to take reasonable care with the Claimant’s monies that could be drawn on the cheques.

22E. As a result of the negligence of the Defendant the Claimant has suffered loss and damage in the sum of £22,050.”

I must return to this amended pleading later in this judgment but for the moment would note that it embodied a further and important development of the case foreshadowed by Mr Weiss in his skeleton argument and elaborated on the opening day of the trial. The allegation in the skeleton argument was simply that Mr Siddique was negligent in entrusting the cheques to a middleman. However, in the amended particulars of claim it was asserted, inter alia, that Mr Siddique was negligent in failing to ascertain the trustworthiness of the persons to whom he passed the cheques and to whom the cheques were made payable.

THE JUDGMENT

The claim as originally formulated was bound to fail. However the Recorder found for the claimant on the basis of a breach of duty of care. He found the claimant 50% contributory negligence.

LATE AMENDMENT OF PLEADINGS

I begin with the issue of amendment of the particulars of claim. In considering any application to amend a court is concerned to ensure that the case is dealt with justly and that, so far as practicable, the real issue between the parties can be adjudicated upon. However, the court is also concerned to ensure that a party faced with an amendment is not unfairly prejudiced. If an amendment is sought at any early stage in a claim, it will often be the case that any such prejudice can be adequately compensated in costs. But where an amendment is sought at a very late stage and perhaps, as here, at the trial, the position may be very different. A party faced with an application to make such a late amendment may be placed in great difficulty in giving it adequate consideration, in determining how it affects the case that has been prepared and in assessing whether, for example, it requires a corresponding amendment to its own pleading, further disclosure or fresh evidence or even an adjournment.

For all of these reasons a court will not only consider the prejudice that would be caused to the party seeking a late amendment if it were refused but will also have careful regard to the prejudice that would be caused to the party faced with the amendment if it were allowed. Moreover, relevant factors to consider will include the degree of precision with which the proposed amendment is formulated and any explanation as to why it is being made so late. Indeed it has been emphasised on more than one occasion by this court that a party seeking a late amendment bears a heavy onus to justify it: see, for example, Swain-Mason v Mills & Reeve [2011] EWCA Civ 14, [2011] 1 WLR 2735 at [72] per Lloyd LJ (with whom Elias and Patten LJJ agreed).

In my judgment the amendment with which we are concerned was sought at a very late stage and in a highly unsatisfactory way. As I have explained, a change in direction was first signalled in Mr Weiss’ skeleton argument served shortly before the commencement of the trial but this was not accompanied, as it should have been, by an application for permission to amend or a proposed amended pleading, or even by an indication that such an application would be made at the trial. Accordingly Mr Siddique was entitled to assume the case he faced was the case which had been formulated in the original particulars of claim, that is to say that he had wrongfully retained the £22,050 and had thereby acted in breach of trust or was liable for monies had and received. Moreover, in so far as the skeleton argument did signal a possible change in direction, it was only by way of the assertion of an alternative claim that Mr Siddique had acted negligently and in breach of the duty of care he owed to Mr Ali by entrusting the cheques to a third party, that is to say to any third party. It is notable that either case would have failed on the findings the Recorder ultimately made.

It was only on the first day of the trial and at the prompting of the Recorder that an application was made on behalf of Mr Ali to amend his particulars of claim. But the Recorder did not seek an explanation as to why the application was being made so late and none was offered.Moreover, and without sight of the proposed amended pleading, the Recorder expressed the view that he was minded to allow it for, as he put it, he would be “very sympathetic” to it. Faced with this preliminary observation from the Recorder and in light of the contents of the skeleton argument he had seen, Mr Din did not at that time raise any further objection, subject to seeing the amendment and it not impacting on the evidence. But, as I have said, he clearly reserved his position. Nevertheless, the Recorder then ruled on the issue in the following terms:

“On that basis I give permission to amend. The broad thrust of the amendment will be that the claimant will advance, or is entitled to advance, a case on the basis of a broader approach to falling within the criteria set out in Hedley Byrne v Heller & Partners in order to show that a duty of care was owed by the defendant to the claimant in accordance with the claimant’s factual case.”

In my judgment the Recorder erred in principle in taking this course. He ought to have considered whether the application should be refused in light of the failure by Mr Weiss to provide any explanation as to why it was being made so late and without there being a properly formulated draft. Had he done so and decided not to dismiss it, he ought to have deferred issuing any ruling upon it until the proposed amended pleading was before the court and until Mr Din and those instructing him had had an opportunity properly to consider it with Mr Siddique. Moreover, I believe the Recorder’s failures in this regard had an important impact on the course of the case, for reasons I will now explain.

THE RECORDER’S REFUSAL TO ALLOW THE DEFENDANT TO ADDUCE FURTHER WITNESS EVIDENCE

The Recorder refused the defendant’s application for permission to call an additional witness.

Mr Din then made his application to call Mr Khan as a witness. As I have mentioned, this application failed for, in marked contrast to the approach the Recorder had taken to Mr Ali and his application to amend, the Recorder considered that it had been made too late. He also expressed the view that any evidence that Mr Khan might have given would have been inconsistent with Mr Siddique’s case that he had handed the cheques back to Mr Ali and that thereafter Mr Ali had dealt with Mr Khan directly.

The Recorder’s view is perhaps understandable in the context of the case as originally pleaded and even in the context of a possible amended case as foreshadowed by the skeleton argument prepared by Mr Weiss, but I believe that the evidence of Mr Khan would have been of direct relevance to the case as eventually formulated in the amended pleading and presented to the court on the second day of the trial. I have set out the material parts of that pleading earlier in this judgment. It was, in my view, still inadequate in the way it framed the alleged duty of care, and this is a matter to which I must return. But for present purposes it is important to note that it marked a fundamental change in direction for it now included an assertion that Mr Siddique had acted negligently in failing to ascertain the trustworthiness of the persons to whom the cheques were passed and to whom they were made payable, that is to say, Mr Khan, Sonargaon Finance and Shipa Begum. I recognise that it was Mr Siddique’s case that Mr Ali had dealt with Mr Khan directly but I do not think that this precluded Mr Siddique from calling Mr Khan as a witness to provide a full account of his background to enable the court to make an assessment of his general reliability and integrity; to explain his intentions in taking possession of the cheques; to explain how and in what way he had been deceived by Mr Chowdhury; and to give evidence as to how the cheques came to be made payable to Sonargaon Finance and Shipa Begum, and as to the integrity of those payees. In short, Mr Khan’s evidence would have elaborated and expanded upon the evidence he gave at the criminal trial, and it would have been highly relevant to Mr Ali’s reformulated claim that Mr Siddique failed to exercise reasonable care in entrusting the cheques to Mr Khan and that this failure caused Mr Ali to suffer loss.

As it was, however, the amended pleading was not before the court when Mr Din made his application for permission to call Mr Khan as a witness so none of these matters could be explored. When the amended pleading was eventually produced on the second day, the evidence was well under way and we were told by Mr Din and I accept that he was not able to give detailed consideration to it with those instructing him. Nevertheless, Mr Din did renew his objection to the amendment in his closing submissions. He maintained that the application to amend was made too late and that Mr Siddique had been deprived of the opportunity to adduce relevant evidence. Moreover, Mr Din continued, the amendment was incoherent.

The Recorder was not impressed. As I have explained, he held that he had decided on the first day of the trial that the amendment should be allowed in principle and that this ruling could not be re-opened. Further, the pleading was, in his view, properly formulated and so it should be allowed. He went on to explain that, had he not given permission in principle on the first day of the trial, he would have done so now, and that was so for the following reasons, namely that Mr Din was able to take the amendment into account in cross examining Mr Ali and his witnesses; Mr Siddique could hardly have been deprived of the opportunity to adduce further evidence when it was his case that he had handed the cheques back to Mr Ali; and the question of adjourning the trial did not arise because an adjournment was never sought.

I have come to the conclusion that this approach was manifestly unjust to Mr Siddique and that in adopting it the Recorder has again erred in principle. It was not correct to say that Mr Din was able to take the amendment into account in cross examining Mr Ali and his witnesses for the amendment in the form allowed was not provided until the second day and at a time when Mr Din was fully occupied and not able to give it his detailed consideration. Nor was it correct to say that Mr Siddique was not deprived of the opportunity to adduce relevant evidence. Mr Khan could have given evidence which was highly relevant to the case as developed in the amended pleading yet the Recorder refused to allow Mr Siddique to call him as a witness. I accept that Mr Din did not ask for an adjournment on the first day of the trial but it must be remembered that at this time the only information available as to the form the amendment would take was that provided in the skeleton argument filed by Mr Weiss, and a claim formulated in that way would have failed on the Recorder’s findings. I accept too that Mr Din did not seek an adjournment on the second day; nor did he renew his application for permission to call Mr Khan as a witness. But by this time the course of the trial had been set; Mr Din was fully engaged in cross examining Mr Ali and his witnesses; and Mr Siddique and Mr Din on his behalf were faced with the decisions of the Recorder on the first day both allowing the amendment and refusing Mr Siddique permission to call Mr Khan.

In my judgment the case set off on the wrong track when the Recorder gave Mr Ali permission in principle to amend on the first day without having seen (and Mr Din having had a chance properly to consider) a draft of the proposed amended pleading and without there being any explanation as to why the application for permission was being made so late. Having taken that course, the Recorder ought to have reconsidered the position at the conclusion of the evidence in light of all the matters to which I have referred, as Mr Din urged him to do. I believe that a reconsideration which had proper regard to the prejudice caused to Mr Siddique arising from the amendment and the way it was presented would have led the Recorder to conclude that the amendment should be refused. I would therefore allow the appeal on the first ground advanced by Mr Din.